Value Equities strategy

The Sparinvest value equities strategy aims to generate superior long-term returns through investment in deeply undervalued stocks. Our fund range covers both developed and emerging markets.
Sparinvest was the first Danish investment house to adopt a value investment approach, when the value equity team was formed in 1997. Since then, we have remained focused on serving our clients through disciplined application of our value investment philosophy and bottom-up stock selection processes. We consider stocks through the lens of a long-term investment horizon, and believe in rigorous fundamental analysis to help us uncover the risks and opportunities facing our portfolios. This naturally includes a consideration of environmental, social and governance issues. We believe in being active, engaged owners, using the power of dialogue and voting to work towards enhanced corporate value at our holdings.

With more than 100 years of combined experience in value investing, our team of long-tenured portfolio managers and analysts are curious and critical thinkers, with a passion for analysing stocks to generate and execute investment ideas.

We offer:

A fundamental, long-term approach to stock selection

A cohesive, long-tenured team

Disciplined value investment processes

A holistic approach to risk

Serious & considered integration of responsible investment issues

A long & solid track record of style-consistent value investing

Value Bonds strategy

Since 2005, Sparinvest’s pioneering value bonds strategy (for corporate bonds) has delivered a much lower default rate than the market average. The strategy is based on academic evidence that value and size are identifiable risk (and therefore alpha) factors within the credit premium*.

Our investment process uses fundamental analysis to select corporate bonds paying higher yields than are justified by the risk of investment. There are no currency plays or derivatives. Our Value Bonds strategy is:

100% bottom up

Off benchmark

Designed to exploit alpha factors

Not reliant on official credit ratings

Focused on bondholder protection for M&A upside

Risk focused - including ESG

Benefits for investors:

100% bottom up investment process - means a thorough investigation of each bond invested in by a team specialising in both credit and security analysis and with a strict approach to indebtedness. This means investors get a well-diversified portfolio of bonds that have passed our rigorous quality control checks and which offer a high recovery rate.

Off benchmark - active management is conviction-led and can lead to considerable divergence from benchmark. Whilst this alpha-focused strategy may deliver higher volatility than average, it is also likely to result in higher long-term returns for investors.

Designed to exploit alpha factors - Our experience shows that the bonds of
value and small-cap companies, as well as companies headquartered in emerging markets, often pay higher yields than are justified by
the risk of investment. By exploiting this knowledge we are able to deliver high return bond investments at lower fundamental risk.

Not reliant on official credit ratings - The companies in which we find alpha are often unfairly penalized by official credit ratings agencies on grounds unrelated to their ability to repay creditors. The fact that the majority of market players rely on official ratings creates value opportunities for us. By relying instead on our own in-depth research, we can target high yielding bonds from fundamentally strong but under-rated companies.

Bondholder protection - we analyse all bond documentation to ensure that bondholders are as well protected as possible for the risk of providing credit. We favour companies with strong protective covenants in place to protect against SEO risk-taking and to offer ‘positive optionality’ (upside in bond prices) in the event of M&A activity.

Risk focused - we focus on fundamental risk in all its potential forms, including default risk, liquidity risk and LBO/change of control risk. We believe that environmental, social and governance issues can impact on a company's ability to repay its debts and must therefore be considered alongside financial risk factors.

Choice of maturity date: we can offer fixed-maturity solutions. Ask us for details.

This strategy is also available with optional ethical screening.

* In 2001 professors Elton, Gruber et al undertook a study of the spread between rates on corporate bonds vs. sovereigns. They concluded that a significant proportion of the credit premium could be explained as being a reward to investors for bearing the systemic risk of investment in smaller and undervalued companies.

Fixed Income strategy

The Danish bond market incorporates a 200-year old mortgage bond market, viewed as one of the safest and best regulated in the world. (Both Mexico and the US are now investigating similar models.) With the special Danish tradition for fixed-income investment, this discipline has always been one of Sparinvest’s strongest cards – and one for which we frequently win industry awards.

Our Fixed-Income strategy is:

Minimal trading

Consistent interest rate sensitivity

Optimized on clearly-defined durations

Disciplined and duration-focused

A route to Danish Mortgage bonds

Benefits for investors:

Minimal trading - because transaction costs eat into bond fund performance, we avoid regular trading based on the release of key economic figures or interest rate predictions. Portfolios are only changed if there are any market anomalies to be exploited. This means cost-savings for investors.

Consistent interest rate sensitivity- we understand that investors need fixed-income investments with constant risk profiles as a reliable mechanism to offset liabilities or diversify against riskier assets. We aim to provide well-behaved investments that maintain their position on the duration spectrum.

Optimized on clearly-defined durations - we manage on the basis that it is impossible to predict short-term interest rate movements but entirely possible to optimize portfolios for different defined durations. We model on basis of diversification, duration and risk criteria. A clear duration policy also helps to minimize trading.

Disciplined and duration-focused - we believe it is possible to achieve good performance relative to the benchmark over time by remaining duration-focused – irrespective of market direction or interest rate movements. Our Fixed Income managers remain disciplined and true to our investment strategy at all times to provide reliable investment vehicles.

Targeted duration options, working to achieve optimal returns within a pre-defined timescale. Any duration is possible;

Short, medium and long Danish Bond strategies to enable investors to access the diversification properties of the Danish fixed-income market which includes one of the world’s largest and best-run mortgage markets;

Strategic Asset Allocation (SAA)

If I "have noticed anything over these 60 years on Wall Street, is that people do not succeed in forecasting what’s going to happen to the stock market."

Benjamin Graham

Given that markets cannot be predicted, we aim for continuous, well-diversified investment portfolios with a tilt towards known asset outperformance factors. Our constant aim is to maximise the return potential from each unit of risk taken.

Our Strategic Asset Allocation strategy is:

Focused on client goals

Optimized for client's risk budget

Continuously invested

Widely diversified

Tilted towards outperformance factors

Regularly rebalanced

Benefits for investors:

Focused on client goals - together with our clients we aim to formulate realistic investment goals and create a bespoke strategic plan to reach them.

Optimized for client's risk budget - The starting point for the strategy is to establish the individual investor’s risk tolerance and investment time-frame. We can then use knowledge of long-term historic asset correlation and volatility patterns to construct optimal, efficient portfolios.

Continuously invested - as consistently-accurate market timing is impossible, we remain continuously invested. This has the dual benefit of minimizing transaction costs and ensuring that investors are in place to benefit from the substantial upswings that often follow steep market declines.

Widely diversified - we aim for a wide diversification of assets, organised in such a way that they should generate the maximum possible return for each available unit of risk in the client’s overall risk budget.

Where an optimal portfolio for a client requires exposure to an asset class that Sparinvest is unable to deliver, we will use style-based returns analysis to find the best investment partner to provide it.

* Studies by Fama and French supply evidence of the outperformance of value and small-cap styles. The discovery of outperformance from momentum strategies is attributed to Jegadeesh and Titman.

SAA - in short

Intelligent Quant.

Years of academic study have concluded that equity investment with a tilt towards certain outperformance factors - specifically value, small cap and momentum* - can lead to excess returns over the longer term. Even more interesting is the fact that value and momentum strategies are negatively correlated, meaning that a combination of these two factors within a portfolio could become even more interesting over time.

Sparinvest's Intelligent Quant strategy is:

Designed to capture the full beta potential of a given index

Tilted towards proven excess return factors

Designed to exploit negative correlation

Designed for ESG improvement

Lower cost

Available as a tailor-made solution

Benefits for investors:

Full beta potential - The strategy offers full exposure to the performance of a given index at a level of tracking error that can be adjusted according to preference. This means that investors don't miss out on index returns.

Exploits negative correlation - The fact that value and momentum strategies are negatively correlated has the effect of increasing the overall performance of a portfolio or decreasing its risk.

Designed for ESG improvement - Where there is a choice of stocks fulfilling the investment objective of the fund, the one with the higher ESG score is preferred. The long term intention is to consistently improve the ESG score of the portfolio over time. Although it is as yet unproven academically, we believe that this is also a potential long-term outperformance factor.

International Headquarter

Sparinvest is an independent provider of investment management and advisory services. Sparinvest’s products are aimed at institutional and private investors, and offered through an ever-increasing number of European-based financial institutions, banks, savings banks, asset managers, insurance companies, etc.

The information provided is not an invitation to purchase units of the sub-funds. Subscriptions of units in the sub-funds will be accepted only on the basis of the most recent Prospectus of the Fund and the latest Annual Report (or Semi-Annual Report, if more recent), which can be downloaded free of charge via this Web site.

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